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Weekly Update # 194 –Will You Be the Next Millionaire?

Message from Bob: As discussed in Unit 2 of the Student Guide, one of the first steps to good money management is to know where your money goes and to PAY YOURSELF FIRST (PYF). In other words, put away a set portion of your paycheck into a savings account for items you really want to buy, but can’t afford now; for an emergency; or even for retirement. Many teens already have good savings strategies, but others only think about the next item they want to buy. Peer pressure and advertising could be part of this uncritical consumerism; but, whatever the case, unnecessary spending now leads to less savings and investing to be well off in the future. Teenagers may not realize how easy it is to become a millionaire by investing early and regularly throughout life. As we showed in our Video Lesson for December 3, 2007, the muscle car or hot rod might be more appealing in the short-term. However, if your choice is either to become a millionaire in the future or to own the car of your dreams now, then putting a lot of money into a vehicle right away might be less appealing.

 

Note to Educators: This week’s update has two follow-up activities, as well as extra discussion questions to select from, since this is the last update of this semester and calendar year. Our next update will be January 14, 2008.

 

Web Site Pick of the Week:

http://www.csgnetwork.com/compoundint2calc.html

CSG Network’s Investment Compound Interest Calculator can help you figure the amount you need to save and how early you need to begin investing in order to have enough for a comfortable, and possibly early, retirement. What will it take for you to become a millionaire? Find out here. Also, if you scroll down the page, you will find other helpful calculators, as well as links to other Web sites of special interest.

 

In the New$... You’re Never Too Broke to Save Money

by Robert H. Flashman, Ph.D., and Alex Lesueur, Jr., M.S.L.S., University of Kentucky Cooperative Extension

Americans are used to conspicuous consumption. How successful are we, really, if we don’t drive as nice a car or truck as our friends? The preoccupation with cars as status symbols isn’t limited to adults; many of you probably work after school to pay for a vehicle and whatever else you want.

We might be used to thinking of ourselves as the richest people on earth, but many of us aren’t doing well at all financially. Even some of your parents who have large incomes aren’t saving and investing like they should.

You might be surprised to learn that “Half of American households live on less than $46,326 a year, the median household income figure for 2005, according to the U.S. Census Bureau” (Liz Pulliam Weston). And that might seem like a good income; wouldn’t you like to make $46,000 a year? But remember, that’s household income, not single income. Many of these households have more than one wage earner, neither of whom is making that much money; many have children to support and expenses that eat up whatever “disposable” income they have. And one fifth of American households make less than $20,000 a year.

But you’re young and most of you have parents who pay for most of your daily living expenses. Of course you want to go out with friends and have fun, and why shouldn’t you? Right now, that part-time job allows many of you the freedom to buy what you want because your parents do pay most of your living expenses. Before you say you don’t have enough money to save, ask yourself this: Do you really need everything you buy? And are you getting the best deals for what you buy?

The secret to saving money is to live on less than you make. Many people have done what they were told was impossible, and you can, too. Some families do not have one TV, let alone three or four in the house; they certainly don’t have an expensive 60-inch plasma TV with $39 to $90/month cable connection and paid programs. They have made the choice not to have TV not only because of the cost, but also because they actually enjoy reading, being active, and spending quality time with friends.

Nearly every teenager dreams of having cool wheels to drive. But do you need to buy your own vehicle or can you borrow your parents’ car when you need to go on dates or go out with friends? We are able to rationalize any purchase; you might argue that you need transportation to school or to your part-time job. Well, can you get a ride from a friend or fellow student who also goes to school or works at the same place?

If you’ve bought your own wheels, you know they aren’t cheap. Not only do you have the car or truck to pay for, but also insurance, gas, and maintenance. How much of your friends’ income goes toward paying for their car or truck? If you really need transportation to get to a part-time job, to start your own lawn-mowing service, or simply to haul junk around, you might settle for an old truck. Unlike a car, an old truck doesn’t have to be an antique to be cool.

According to Liz Pulliam Weston, “even paycheck-to-paycheck types can save money. Here’s how you can do it. ... Remove ‘can’t’ and ‘won’t’ from your vocabulary.” What we think is powerful: if we believe we can’t or won’t improve our lives, we’re probably right. But, if we believe we can and will, we give ourselves the power to change.   

Money isn’t everything, but those who don’t have enough can tell you how important it is to your overall well-being. Those who thrive in life, who put their priorities on what’s really important—family and friends—probably think of money as a means, rather than an end in itself. You don’t need to become a workaholic and sacrifice happiness to make more and more money; and you won’t want to avoid all spending on entertainment. You just need to work steadily toward your goals and save money constantly from an early age. With money, slow and steady is the way to go.

Source: “Too broke to save money? Never,” by Liz Pulliam Weston, MSN Money, 10/02/06. http://articles.moneycentral.msn.com/SavingandDebt/SaveMoney/TooBrokeToSaveMoneyNever.aspx

Discussion Questions:

1.) How many of you who work part-time or during the summer pay yourself first?

2.) Living in your current community, how much annual income do you think you would need in order to make ends meet if you have children?

3.) What jobs exist in your community that will allow you to make ends meet?

4.) Are the classes you’re currently taking preparing you for the occupation you want or for the future education and training you will need for that occupation?

5.) What are some unnecessary expenses that you could cut back on (if not remove) from your life?

6.) What strategies do you have for saving money?

7.) What goals do you have for the future? Will the goals take money to attain?

Follow-up Activities:

(a) List every possible expense you might pay on any given Friday. Consider that you’ll probably eat out with friends or go to a movie. List everything: gas, drinks at school and/or movie, tickets, eating out, pack of smokes, etc. Then separate which expenses were necessary or unnecessary.

(b) Read “A Beginning Investor's Best Friend,” by Erin Burt, on Kiplinger’s Web site:
http://www.kiplinger.com/columns/starting/archive/2006/st0824.htm

Select three mutual funds you would consider. Then explain why you selected these three over the hundreds of others.

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/fcs/hsfp

The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.

If you are not already on our listserv:

The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/fcs/HSFP/response.htm.

The use of any trade names or products does in no way constitute a recommendation for this product.